Liberia/Global: Financial Secrecy at Work

Editor's Note

"Finance Uncovered, working with an anonymous Liberian journalist,
has exposed a little-known offshore business registry that has
created tens of thousands of anonymous companies and registered them
to a non-existent address in Monrovia, Liberia's capital city.
Although these companies are technically a creation of Liberian law,
management of the registry is based in the United States and appears
to have the support of the US government. ... Our investigation has
discovered over half a billion pounds of high-value London property
registered to Liberian offshore companies."

In the wake of the Panama Papers leak of an extraordinary array of
data from one prominent law firm, the revelations continue of the
tangled web formed by international networks involved in concealing
their assets through financial secrecy. This AfricaFocus Bulletin
contains a report on one such case, by investigative journalists
working as part of the Finance Uncovered network, including the
AmaBhungane Centre for Investigative Journalism in South Africa.

This revelation came in the wake of an evolving scandal based on a
report from Global Witness, revealing how two British businessmen
used scams and bribery to deceive investors, used a London-based
registry (the Alternative Investment Market), along with bribery of
Liberian government officials, to pitch fake investments. Earlier
this week, Liberian judicial authorities indicted Sable Mining
Company and Sable's Liberian lawyer Varney Sherman, Speaker of
Liberia's House of Representatives. See Global Witness press
releases at https://www.globalwitness.org/en/campaigns/liberia/

Sorting out the details in cases such as these is complex, while
some press reports cite an wider set of claims of corruption
involving Liberian officials and large multinational corporations
involved in the country. The move by the Liberian government to
indict the alleged culprits in the Sable mining case is positive.
But there can be more doubt that there is much more to uncover, both in
Liberia and in the international networks of those outside the
country who are using the country for their own illicit enrichment.

For additional recent news on these development from the Liberian
and international press, visit http://allafrica.com

Liberia: America's outpost of financial secrecy

[This investigation was supported by the Thomson Reuters Foundation,
who funded a trip by Finance Uncovered's Investigations Director to
Liberia. It forms part of their Wealth of Nations Programme. In
Liberia our director worked with a local journalist to try to
understand the workings of Liberia's little spoken about corporate
registry, a factory for anonymous companies. The name of the
Liberian journalist has been withheld to prevent reprisals against
his publication. ]

After the Panama Papers, attention focused on the UK's role at the
heart of a tax haven empire. But the UK isn't the only country which
has created a web of offshore secrecy. In our latest investigation
published today in South Africa's Daily Maverick in cooperation with
AmaBhungane, we probe Liberia - America's offshore outpost in
Africa.

Finance Uncovered, working with an anonymous Liberian journalist,
has exposed a little-known offshore business registry that has
created tens of thousands of anonymous companies and registered them
to a non-existent address in Monrovia, Liberia's capital city.

Although these companies are technically a creation of Liberian law,
management of the registry is based in the United States and appears
to have the support of the US government.

The companies, which can be purchased online, offer near-total
anonymity to their clients, allowing them to hide assets without
fear of being caught by law enforcement or revenue authorities.

Our investigation has discovered over half a billion pounds of highvalue
London property registered to Liberian offshore companies. And
there have been allegations that revenues from the registry were
used to fund arms purchases during Liberia's violent civil war.

Liberia's secret companies

Non-resident corporations are a particular form of corporate entity
offered by the Liberian government to foreigners. They cannot do
business in Liberia, and anyone in the world can set up such a
corporation online within 24 hours through a corporate service
provider.

Registered with the ministry of foreign affairs, they have no
liability to pay taxes in Liberia, and no obligation to declare who
owns them or file annual accounts.

They can also issue "bearer shares", a legal instrument banned in
most countries because of the ease with which they can be used for
tax evasion and money laundering.

Bearer shares are unregistered certificates of ownership which can
be physically transferred, changing ownership of a company without
any record being kept. They are companies in cash form.

This means that no one, including tax and law enforcement
authorities and the directors of the company itself, can find out
who the owners are.

It is unclear exactly how many offshore companies Liberia has
established. The Liberian government does not publish official
figures, and Liberian officials repeatedly stonewalled requests for
information, citing "commercial confidentiality".

The registry is apparently a sensitive issue for the foreign
ministry. The ministry's then-deputy minister for legal affairs,
Boakai Kanneh, became visibly enraged when we raised the issue
during a brief meeting and ordered us out of his office.

Binyah Kesselly, former commissioner of the Liberia Maritime
Authority (LMA), which has oversight of the corporate registry, said
in answer to e-mailed questions that the number of companies
registered is kept confidential because of competition in the
maritime industry.

The Liberian International Shipping and Corporate Registry (LISCR),
a private company that manages the registry on the government's
behalf, also cited commercial confidentiality in response to
questions.

Outside LISCR, the LMA, the ministry of foreign a airs and the
president's office, few Liberians seem aware that the offshore
companies registry exists.

The minister in charge of the Liberian domestic business registry
until his death earlier this year, deputy minister of commerce and
trade services Cyril Allen, told us in December 2015 he was unaware
that Liberia had any other system of registering companies.

Some of the tax advisers who use the registry also seemed strangely
unwilling to discuss it. Price Waterhouse Coopers is the only member
of the "big four" accountancy rms with an office in Liberia, and is
listed as a "certified service provider" on the LISCR's website.

To qualify for this programme PwC must actively promote the use of
Liberian companies. When we contacted them, the company said it
would only respond to a letter delivered to its Monrovia office.

A letter was delivered, but no reply was forthcoming.

Liberia's former auditor-general, John Morlu, slammed what he called
secrecy surrounding the registry and the Maritime Programme of which
it forms part.

He told us in an email: "The Presidency has managed to conceal the
corporate registry in the infamous maritime registry with 99% of the
Cabinet, 99% of the legislature, and 99% of the Liberian people
having no clue what a corporate registry is.

"Many Liberians know that the Maritime Programme is lucrative, and
since it has always been the prerogative of the presidency no one
dares bother to poke into it." However, Finance Uncovered located an
OECD report from 2013 on Liberia's tax and transparency laws which
states that 55 000 companies are registered in that country. Most
are understood to be non-resident corporations.

In 2009 the trial of former Liberian president and convicted war
criminal Charles Taylor heard that the offshore corporate registry
had registered 40 000 companies.

Asked for comment, the Liberian government claimed that the maritime
programme and the registry are not secret and that President Ellen
Johnson Sirleaf usually reports on the activities of the registry in
her annual State of the Union address.

No mention of the registry could be found in the previous twoffstate
of the Union addresses. We asked when Sirleaf last updated the
Liberian legislature on the programme, her spokesperson, Jerolinmek
Matthew Piah did not respond.

In search of 80 Broad Street

To receive mail, all Liberian non-resident corporations must have an
address in Liberia and a registered agent.

Under Liberian law the LISCR Trust Company, a private entity with
the address of 80 Broad Street, is the exclusive agent for all
Liberian non-resident corporations. This means that all such
corporations have the same mailing address - 80 Broad Street,
Monrovia.

Broad Street is the commercial heart of downtown Monrovia. But 80
Broad Street does not exist, and when we visited the area none of
the businesses in the street had heard of it.

At the ministry of post and telecommunications, no one would say who
was assigned to that address.

Finally, a DHL agent we interviewed found that mail for 80 Broad
Street is diverted to LISCR, on 5th Street in Sinkor, a few
kilometres away.

At the LISCR offices, we-were told that the managing director,
Joseph Keller, was on long-term sick leave in the US and no one had
replaced him.

Asked whether anyone at LISCR's Monrovia office could explain what
happened there, we were told "no".

LISCR's Monrovia office appears to be little more than a mail room,
receiving correspondence for the thousands of companies registered
there, which is scanned into computers and e-mailed to LISCR's US
headquarters.

The US connection

Liberia's offshore registry would not have been possible without US
patronage . A LISCR spokesperson said the foundation of the registry
"resulted from an initiative of the United States government at the
end of World War 2 to set up, in effect, an offshore ship register
for the United States."

Liberia was chosen because of the "strong historical connections
between the US and Liberia".

The Liberian shipping registry was founded in 1948 by former US
secretary of state Edward Stettinius, who persuaded the Liberian
government to contract out its shipping register to a private US
company.

Today LISCR, the register's current manager, is based in Vienna,
Virginia, at the heart of the US military-industrial complex close
to Washington DC. It has offices across the world.

The fees collected by LISCR are transferred to the Liberian
government through a special account at the US Federal Reserve.

Liberian law continues to require that LISCR is owned and managed by
US nationals. Its owner is Yoram Cohen, whose investment rm YCF
Group owns agriculture, shipping and telecommunication companies
operating in 18 countries, according to its website.

Cohen was also the president of Cellcom, a Liberian cell phone
company, before it was sold to Orange earlier this year.

LISCR itself is registered in the tax haven and secrecy jurisdiction
of Delaware in the US -prompting criticism in 2003 from the United
Nations, which said it would have preferred the company to publicly
declare its shareholders.

LISCR said the UN has never accused it of wrongdoing and that it has
always co-operated with Security Council investigations into
Liberia.

Throughout the history of the registry, LISCR and its predecessor
have been staffed by retired US generals and former employees of the
US coast guard.

In return for hosting this outpost of financial secrecy, the
Liberian government gets to keep 67% of the net revenues collected
by LISCR on its behalf. Funds raised by the company accounted for
75% of the government's annual revenues during Charles Taylor's
rule, according to Taylor's head of maritime a airs, Benoni Urey.
During the first Liberian Civil War, revenues from the registry
accounted for 90% of government revenue.

The receipts are far less significant now, but there are still
concerns about where they end up. Under the Taylor administration
the Bureau of Maritime Affairs (BMA), a Liberian government agency
that oversees the work of LISCR, took 10% of the revenue from the
maritime programme for its running costs. This was off the
government's balance sheet, and the UN alleged that Urey used the
agency to make off-budget arms purchases during the civil war in
violation of UN sanctions.

In a recent interview, Urey claimed that the money granted to the
BMA was used for legitimate running costs. He said his agency was
audited four times and on each occasion he was cleared of
wrongdoing.

According to news reports, an agreement signed earlier this year
between LISCR and the Liberian government grants the Liberian
Maritime Authority, which has taken over from the BMA, 25% of
revenues to meet its running costs. There appears to be little
scrutiny of where the money goes, although there is no evidence that
it is used for inappropriate expenditure.

In 2009, LISCR's contract with the government came up for renewal,
and the negotiations led to a political storm known as "Knucklesgate".

Willis Knuckles was President Sirleaf's former chief of staff. In
2009, he was chairperson of Cellcom, LISCR's sister company, when
emails emerged purporting to show that Knuckles tried to bribe
members of the government, including Sirleaf herself, during the
negotiations to extend LISCR's contract.

An independent commission was set up to investigate the allegations
led by Dr Elwood Dunn, a respected academic. The Dunn Commission,
whose report can still be found on the Liberian president's website,
states that their findings were in part based on interviews with
Yoram Cohen and other sta ff at LISCR and Cellcom. The commission's
report cleared Sirleaf of corruption but criticised Knuckles for
offering a $200 top-up card to the president's brother-in-Law.

The commission found evidence of some "unclear payments" by LISCR
that should be probed further, including a $600 000 "pre-payment"
referred to in an email on a hard drive in Sirleaf's mansion.

In its response to Finance Uncovered, LISCR issued a stinging attack
on the Dunn Commission, claiming that the commission never contacted
the company in the course of its inquiries. LISCR added that the
alleged payments from it referenced on the hard drive in the
president's mansion never took place and that the company was
subsequently cleared of any wrongdoing in a letter from the Liberian
justice ministry.

Liberia blacklisted

The offshore registry has prompted a growing number of countries to
place Liberia on tax haven blacklists, with potentially farreaching
consequences.

In June 2015 the European Union released a consolidated list of tax
havens drawn from its member states - and Liberia was included by
Bulgaria, Greece, Croatia, Latvia, Lithuania, Poland, Portugal,
Slovenia and Spain.

Now, the EU is threatening to create a new list compiled by the
European Commission, and may impose sanctions on states that do not
meet international tax and transparency

Brazil lists Liberia as a "privileged tax regime". Argentina has
produced a white list of countries that are not tax havens, and
Liberia is one of the few that is not included.

Several US states, including Montana and Oregon, have drawn up tax
haven lists, and companies in these states doing business in listed
countries have greater tax obligations. Again, Liberia features.

Asked to comment, Sirleaf's office and LISCR emphasised that the
registry complies with international norms and standards on tax and
transparency.

Said the president's office: "Liberia does not conform to the
definition of tax haven and in fact is not considered such by
leading OECD countries such as France and the USA." It added, "Over
the past years, the government of Liberia has ... taken measures to
improve upon the transparency and management of the programme to
meet all of the OECD requirements. Liberia is in fact an OECD
'white-listed' jurisdiction."

On its website and in its statement to Finance Uncovered, LISCR
echoed the claim that Liberia is an OECD "white-listed
jurisdiction".

However, the OECD ceased to publish a white list in 2009.
Responsibility for international coordination of policy in this area
has passed to the OECD Global Forum on Transparency and Exchange of
Information for Tax Purposes. A spokesperson confirmed that the
forum does not publish white lists.

The forum, which has 131 members, including Liberia, conducts phased
reviews of whether governments meet agreed standards on tax and
transparency.

Last reviewed in 2012, Liberia has yet to pass phase one. And this
is because of lack of access to ownership and accounting information
from Liberian non-resident corporations.

In response, the government said: "There is no bad stigma attached
to this designation, as many other countries have been in the same
position. The reason for this is very simple. Liberia has not been
able to compete with the larger countries, such as in Europe, as it
does not have the infrastructure and manpower in place to assist
with the implementation of the rigorous standards required by the
OECD."

Only eight states - Liberia, Vanuatu, Trinidad and Tobago, Nauru,
Lebanon, Micronesia, Guatemala and Kazakhstan - have failed to make
it past phase one of the OECD Global Forum. Even tiny well-known tax
havens such as the British Virgin Islands, the Cayman Islands,
Mauritius and Panama have moved to phase two.

This month Liberia passed new legislation on corporations, after the
country was given a deadline by the OECD, which is conducting its
latest review.

This reiterates companies' obligation to keep internal accounting
and ownership records but does not oblige them to file those records
with the corporate registry.

LISCR emphasised that the provisions are similar to those of many
other countries.

For the first time the law gives the Liberian authorities power to
request documents from the companies themselves.

A failure to comply results in a minimum fine of $1 000, while the
ne for not keeping records is capped at $5 000. Liberian companies
also continue to be allowed to issue bearer shares, which can make
attempts to discover the ownership of companies extremely difficult.

'Unimaginable damage'

After the European Union published its tax haven blacklist,
officials at LISCR's US headquarters started to email campaign
groups in Europe to ask for help in lobbying to get Liberia removed
from the list.

In one e-mail seen by Finance Uncovered, a senior LISCR official
writes: "The harm this blacklisting will do to reputation and
commercial enterprise is unimaginable."

It is a fear echoed by banking representatives in Liberia. In the
Liberian Observer, local banks said it was difficult for them to
establish correspondent banking relations because of Liberia's
reputation as a money-laundering centre.

Asked about the effect on a country such as Liberia of being added
to a blacklist, Melissa Dejong, a tax policy analyst for the OECD,
said they are aware of financial institutions moving out of
countries that do not comply with the Global Forum recommendations,
and that blacklisting deters investment.

"In some cases, jurisdictions may impose rules with respect to
jurisdictions that do not meet the Global Forum standards," Dejong
said.

"For example, a jurisdiction may impose tax consequences on their
own taxpayers who engage in transactions with a person in a
jurisdiction that does not meet the Global Forum standards, such as
higher withholding taxes, increased likelihood of audit, denial of
tax benefits, increased information reporting requirements. These
create a disincentive to investment."

A national resource

Kesselly, the former chief executive of the Liberian Maritime
Authority, said the characterisation of Liberia as a tax haven is a
"misconception". Kesselly said Liberia is not listed as a "highrisk"
jurisdiction by the Financial Action Task Force, and that
diplomatic correspondence with the EU suggests the country will be
taken off the European list of tax havens later this year.

Calling the registry "a national resource", he said that every non
resident Liberian corporation must have an agent and an address in
Liberia where official documents and mail can be served, regardless
of whether anything else happens there.

In addition, non-resident corporations pay fees to the Liberian
government on incorporation and every year thereafter, as well as
when they file documents.

"The government views these programmes as national resources and is
committed to protecting these resources by modernising them to both
meet the needs of clients, and maintain compliant ratings from our
international peers," Kesselly said. "This synergy ultimately
benefits the people of Liberia."

However, Morlu, Liberia's former auditor-general, said the small
income the registry generates for the government - between $9-
million and $15-million in most years - does not justify the
tremendous risk.

"There are better ways to make money and since Liberia does not have
the means, the desire and the political will to create a stronger
regulatory and enforcement regime, we are better off not adding to
the world's problem of terrorist financing, drug financing and
illicit fkow of funds from other poor countries," Morlu said in an
email.

He would like to see the registry reserved only for legitimate
shipping companies. With the OECD report due on its progress in
meeting transparency standards, and the EU threatening sanctions
against countries on its blacklist, this summer will be a key moment
for Liberia.

Scrutiny by international institutions is bound to grow in the wake
of the Panama Papers. If Liberia is once again found to be lacking,
the consequences for this fragile economy, still recovering from
Ebola, could be devastating.

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